GM, Ford need electric-car batteries, but try different ways to get them

Auto manufacturers, putting billions of dollars into developing electric cars, are now facing an important alternative: be more involved in manufacturing core batteries or buy them from others.

Batteries are one of the most expensive components of an electric vehicle, accounting for between a quarter and a third of the car’s value. Officials said that lowering costs are driving their costs toward profitability.

But while internal combustion engines have traditionally been engineered and manufactured by auto manufacturers themselves, the production of batteries for electric cars dominates Asian electronics and chemical firms, such as LG Chem Limited

0519,910 4.47%

And panasonic Corp.

PCRFY -2.34%

, And new people like China’s contemporary Amperex technology Co.

300,750 2.05%

With regulators pushing more car sales to car companies pushing around the world, auto executives worry that there won’t be enough factories making high-quality batteries.

California, America’s largest car market, said last month that it would end sales of new gasoline and diesel-powered passenger cars by 2035, putting pressure on the auto industry to speed up its shift to electric vehicles.

Auto makers are adopting various avenues to lock in supplies for electric cars.

While most battery packs make, a large metal enclosure often lining the bottom of the car, they also require cells that are tied together to form core power storage.

Tesla opened its Gigafacting several years ago in Nevada to manufacture batteries with Panasonic, which would produce cells for PAX in a shared space. Electric-car manufacturers specifically wanted to secure production for their own models and lower manufacturing and logistics costs.

It is now looking at more sources of that production.

Tesla teamed up with Panasonic to produce battery cells at the electric-car manufacturer’s Gigafactory in Nevada.


Benjamin Spillman / Associated Press

Chief Executive Officer Elon Musk said last month that Tesla would continue to buy cell from Panasonic and other suppliers, but it was also working on its cars and production capabilities to ensure that it could keep up with demand for its cars .

After Tesla’s leadership, General Motors Co.

GM 0.26%

And South Korea’s LG Chem is putting $ 2.3 billion into a nearly 3 million-square-foot factory in Lordstown, Ohio, which GM says will eventually produce enough battery cells to manufacture hundreds of thousands of cars each year .

In Europe, Volkswagen AG

fast -0.42%

Taking a similar path, an investment of about $ 1 billion in Swedish battery startup Northvolt AB, including some funding to build a cell-manufacturing plant in Salziter.,

Germany, as part of a joint venture.

Others like ford f 2.07%

Motor Company and Daimler AG

DMLRY -0.36%

Making clear about the construction of their own cells, officials said they preferred to contract with specialized battery manufacturers.

Auto makers say the supply-chain mess has already put some new model launches and projects in jeopardy.

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For example, Ford and VW have agreements with SK Innovation 096770 0.72%

Supplying battery cells for future electric-vehicle models. The South Korean company is building a factory in Georgia to meet this demand, but the fight over trade secrets has jeopardized the future of the plant and could hamper new model launches, with both auto manufacturers in legal filings Have said

GM officials say the risk of relying on suppliers has prompted them to produce their own battery cells, with LG Chem.

“We’ve been able to control our destiny,” said Ken Morris, GM vice president of electric vehicles.

Mr. Morris said that bringing in-house manufacturing would give the company more control over the raw materials to be purchased and battery-cell chemicals.

But setting up production, even in a joint venture, is a costly proposition, and will not necessarily ensure the timely supply of cells. There are also risks with making large investments on a battery technology as a breakthrough can make it obsolete.

Ford cites those factors in deciding against a similar investment for now.

Ford executive How Thai-Tang told analysts in August that the industry looked at traditional models of contracts with independent suppliers to adapt to its battery cell needs.

“We have competitive tensions with many suppliers working together, which allows us to reduce costs,” said Mr Thai-Tang, the company expected to pay prices for the cells together with GM and Tesla is.

Meanwhile, Ford may abandon the capital-intensive task of setting up manufacturing facilities for research and battery companies, Mr. Thai-Tang said.

Germany’s Daimler has tried both strategies.

The car company had made its own lithium-ion cells by 2015 through a subsidiary. But Daimler chief executive Ola Callenius said it was better to spend elsewhere to improve capital.

The auto maker instead signed long-term supply agreements with Asian companies such as Chinese battery manufacturer CATL and Farasis Energy 688567 0.43%

(Ganzhou) Co., which Daimler invested in last year.

The company has said it is spending about $ 23.6 billion on purchase agreements but is keeping its battery research in-house.

“Let’s rather put that capital into what we do best, cars,” Mr. Kellenius said.

Investors and big auto makers are pouring money into electric-vehicle startups in search of the next Tesla that is expected to cash in. A company is investigating the most. The WSJ explains. Illustration: Jacob Reynolds / WSJ

Write Ben Foldy on Ben [email protected]

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